Americans Will Pay For Trump's Wall Even With A Mexican Import Tax

President Donald Trump looks up after signing the final of three executive orders, Monday, Jan. 23, 2017, in the Oval Office of the White House in Washington. (AP Photo/Evan Vucci)

Questions of immigration and Donald Trump's promises of a wall between the US and Mexico have been hot and heavy since the election campaign. Only, now it's time for action, not talk. Yesterday, Trump signed an executive order to begin construction of the wall.

Forget immigration policy or how effectively the wall, which is more a continuation of the nearly 600 miles of fence already built, will slow entry. (Ladders are cheap and tall.) Instead, consider who's paying for the construction. It turns out that, no matter how it's phrased, American citizens will pay for the wall, probably through increased prices on goods that could be a burden to the economically disadvantaged.

During the election and even now, Trump promised that Mexico would absolutely pay for the wall. Mexican officials, including the country's president, have said that they absolutely won't.

In the past, Trump said that there were two ways Mexico might pay. One would be a direct payment. The other would be imposition of a tax of some sort, although previously he offered no details. The latest details are that he is proposing a 20 percent tax on all imports from Mexico.

he importer is ultimately responsible for paying any duty owed on an import. Determining duty can be very complicated, and while shipping services will often give an estimate for what the duty rate on an item might be, only CBP can make a final determination about what is owed. You should not be misled into thinking your purchase price includes duty because the seller cannot say with absolute certainty what the duty will be. As a rule, a purchase price that includes shipping and handling does not include duty or any costs associated with clearing the goods through CBP. First time importers are often surprised by bills they receive for duty, U.S. Customs and Border Protection merchandise processing fee, and something referred to as "customs fees," which are actually charges for the services of the broker who cleared your goods through CBP.

The entities responsible for paying the tax are the companies in the U.S. that are importing the goods. They, in turn, pass the costs along to their customers, which eventually charge consumers. And even if somehow the U.S. could force Mexican companies to pay the duties, those companies would just raise their prices to cover the extra cost.

In other words, Americans will pay for the wall through an additional tax embedded, which is effectively invisible to consumers, into the price of many products they purchase. According to the U.S. Trade Representative's office, in 2015 the U.S. imported $316.4 billion in goods from Mexico. That's vehicles, machinery, mineral fuels, and optical and medical instruments. All sorts of items and services will become more expensive, making an implicit tax on many types of consumption that cause the heaviest burden to those with the least income and wealth.

Also, 20 percent of the 2015 level of import is $63 billion that gets passed onto U.S. consumers, so there's the question of how closely the income would be monitored and when the tax would be removed. That could become an addicting source of government revenue.

[Update: Apparently the administration has now changed its mind and Trump's chief of staff, Reince Priebus, has called the tax part of a "buffet" of possible choices. The unpredictable approach to announcing policy has heads, and some currency markets, snapping back and forth.

That still leaves the promise of Mexico paying for a wall it doesn't want and has refused to consider funding blurry at best. If the country won't pay, there aren't that many tools to extract money, and many of the theoretically possible ones wouldn't necessarily work under the existing NAFTA treaty. It's one thing to float ideas during a campaign, but people and businesses need predictability in governance to plan. Right now that is impossible.]